Kenya's inflation rate dropped for the third time in a row to a 16-month low, as food costs rose at a slower pace and gasoline prices remained unchanged, announced Kenya National Bureau of Statistics in a statement on Thursday.
"The overall year on year inflation rate as measured by the Consumer Price Index (CPI) was 6.7%, in August 2023," according to the statement.
The annual rate of consumer prices rising was the slowest rate in 16 months, compared to 7.3% in July, the statement reads.
"This is on the back of easing food prices following improved harvests across the country," said research analyst at Genghis Capital Investment Bank, Ronny Chokaa, as cited by media.
Prices of food products dropped during the 2022-2023. In particular, the prices of maize grain-loose, maize flour-loose, fortified maize flour, potatoes and tomatoes decreased, based on the Kenya National Bureau of Statistics statement.
"Although, relative to last year, Food and Non-Alcoholic Beverages Index increased by 7.5%, on a month-to-month basis, it decreased by 0.5% between July 2023 and August 2023," the statement reads.
Lately, Kenya has enjoyed improved yields; for instance, recently, President William Ruto expressed hope that in 2023, his country would produce the largest maize harvest in its history.
He explained that the success of the program, which has helped local producers to increase the yields, is due to the fact that the authorities have given farmers access to cheap fertilizers.
Among other things, in early August, Kenyan authorities launched the processing of 34,000 tons of Russian fertilizer condensate to be distributed as 100,000 tons of finished subsidized product to farmers.
At the same time, the Housing, Water, Electricity, Gas and Other Fuels' Index data, demonstrated that during 2022 and 2023 the inflation rate in the sphere remained relatively the same.
"The Housing, Water, Electricity, Gas and Other Fuels' Index remained relatively the same between July 2023 and August 2023. This was mainly due to increase in the prices of electricity of 200 Kwh and 50 Kwh by 1.5 per cent and 1.8 per cent, respectively," stated Kenya National Bureau of Statistics.
"Whereas, the prices of petrol and diesel remained unchanged between July 2023 and August 2023," according to the statement.
Analyst Ronny Chokaa explained that the government's strategy to resort to the Fuel Stabilization Fund has helped to stabilize prices at pumps, which also supported alleviate price pressures.
"The inflation outlook over the coming month remains largely on the upside," he said. "Firstly, we know that OPEC nations led by Saudi Arabia have opted to cut down oil supply for the remainder of the year. Secondly, there is the aspect of the weakening shilling, which compounds the costs of procuring oil imports." said the analyst as cited by media.
Kenya Economic Outlook
According to the African Development Bank (AfDB), the East African country's GDP is expected to increase 5.6% in 2023 and 6.0% in 2024, driven by services and household consumption.
The political decisions that have helped the increase of the state's economic growth includes diversification of exports and financial reforms, according to AfDB.
"Possible risk mitigation measures include diversifying exports and market destinations, enhancing domestic resource mobilization, deepening financial sector reforms, and accelerating structural reforms," stated the African Development Bank on the Kenya Economic Outlook.